Acquisitions and Other Transactions

9 Months Ended

Sep. 30, 2020

Business Combinations [Abstract]

Acquisitions and Other Transactions

Acquisitions and Other Transactions

Upjohn Business Combination Agreement

On July 29, 2019, the Company, Pfizer Inc. (“Pfizer”), Upjohn Inc., a wholly-owned subsidiary of Pfizer (“Upjohn” or “Newco”), and certain other affiliated entities entered into a Business Combination Agreement (as amended, the “Business Combination Agreement”) pursuant to which the Company will combine with Pfizer’s Upjohn Business (the “Upjohn Business”) in a Reverse Morris Trust transaction (the “Combination”). Newco, which will be the parent entity of the combined Upjohn Business and Mylan business, will be renamed Viatris Inc. (“Viatris”) effective as of the closing of the Combination. The Upjohn Business is a global, primarily off-patent branded and generic established medicines business, which includes 20 primarily off-patent solid oral dose legacy brands, such as Lyrica, Lipitor, Celebrex and Viagra.

Prior to the Combination and pursuant to a Separation and Distribution Agreement (as amended, the “Separation Agreement”), dated as of July 29, 2019, between Pfizer and Newco, Pfizer will, among other things, transfer to Newco substantially all of the assets and liabilities comprising the Upjohn Business (the “Separation”) and, thereafter, Pfizer will distribute to Pfizer stockholders all of the issued and outstanding shares of Newco (the “Distribution”). When the Distribution and Combination are completed, Pfizer stockholders as of the record date of the Distribution will own 57% of the outstanding shares of Newco common stock, and Mylan shareholders as of immediately before the Combination will own 43% of the outstanding shares of Newco common stock, in each case on a fully diluted basis. Newco will make a cash payment to Pfizer equal to $12 billion, to be funded with the proceeds of debt incurred by Newco, as partial consideration for the contribution of the Upjohn Business from Pfizer to Newco.

The consummation of the Combination is subject to the satisfaction (or, if applicable, valid waiver) of various conditions, including (a) the expiration or termination of any applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder and the receipt of regulatory approvals in certain other jurisdictions, (b) the consummation of the Separation and the Distribution in accordance with the terms of the Separation Agreement, (c) the approval of the Combination by Mylan shareholders, (d) the absence of any legal restraint (including legal actions or proceedings pursued by U.S. state authorities in the relevant states) preventing the consummation of the transactions, (e) in the case of Pfizer’s and Newco’s obligations to consummate the transactions, (i) the distribution of $12 billion in cash from Upjohn to Pfizer in accordance with the terms of the Separation Agreement and (ii) the receipt by Pfizer of a U.S. Internal Revenue Service (“IRS”) ruling and tax opinion of its tax counsel with respect to the Combination, and (f) other customary closing conditions.

On March 17, 2020, Pfizer received the IRS ruling with respect to the Combination, which is generally binding, unless the relevant facts or circumstances change prior to closing. On June 30, 2020, Mylan’s shareholders voted to approve the Combination at the extraordinary general meeting of shareholders.

On September 14, 2020, the European Commission (the “Commission”) approved the divestiture buyers with which Mylan entered into agreements for the sale of certain of Mylan’s products in Europe, which was a requirement of the Commission’s conditional approval of the Combination in April 2020.

On October 30, 2020, Mylan and Pfizer announced that the U.S. Federal Trade Commission (the “FTC”) accepted a proposed consent order, which concluded the FTC’s review of the proposed Combination. The parties have now obtained all required antitrust clearances for the Combination. The Combination is expected to close on November 16, 2020.

On May 29, 2020, Mylan, Pfizer, Newco and certain of their affiliates entered into Amendment No. 1 to the Business Combination Agreement (the “BCA Amendment”), and Pfizer and Newco entered into Amendment No. 2 to the Separation and Distribution Agreement (the “SDA Amendment” and, together with the BCA Amendment, the “Amendments”). In light of the ongoing regulatory review process, including delays related to the COVID-19 pandemic, the Amendments provide, among other things, that the closing of the Combination shall not occur prior to October 1, 2020 (unless otherwise agreed to by Mylan and Pfizer) and that the Outside Date (as defined in the Business Combination Agreement) shall be December 31, 2020.

On June 16, 2020, Upjohn entered into a revolving credit agreement (the “Upjohn Revolving Credit Agreement”), by and among Upjohn, certain lenders and issuing banks from time to time party thereto and Bank of America, N.A., as administrative agent (in such capacity, the “Upjohn Revolving Administrative Agent”). The Upjohn Revolving Credit Agreement contains a revolving credit facility (the “Upjohn Revolving Credit Facility”) under which Upjohn may obtain extensions of credit in an aggregate principal amount not to exceed $4.0 billion, in U.S. dollars or alternative currencies including Euro, Sterling, Yen and any other currency that is approved by the Upjohn Revolving Administrative Agent and each lender under the Upjohn Revolving Credit Facility. The Upjohn Revolving Credit Facility will be available to Upjohn upon (a) its delivery of a certificate certifying that (i) the conditions to the consummation of the Combination have been satisfied or waived or are expected to be satisfied or waived on the date of funding of such facility or within one business day thereafter and (ii) the distribution by Pfizer to its stockholders of its shares of Upjohn’s common stock pursuant to the Separation Agreement is expected to be, the Combination is expected to be, and the contribution of the Upjohn Business to Upjohn has been or is expected to be consummated on the Upjohn Revolver Closing Date (as defined below) or within one business day thereafter (an “RMT Condition Certificate”) and (b) the satisfaction of certain customary conditions (the date such conditions are satisfied or waived being referred to as the “Upjohn Revolver Closing Date”). Subject to satisfaction of the foregoing conditions, up to $1.5 billion under the Upjohn Revolving Credit Facility will be available to Upjohn in a single draw on the Upjohn Revolver Closing Date for the sole purpose of funding a portion of the cash payment of $12.0 billion by Upjohn to Pfizer as partial consideration for Pfizer’s contribution of the Upjohn Business to Upjohn, as required by the Separation Agreement.

On June 16, 2020, Upjohn entered into a delayed draw term loan credit agreement (the “Upjohn Term Loan Credit Agreement”), by and among Upjohn, Mizuho Bank, Ltd. and MUFG Bank, Ltd., as administrative agent. The Upjohn Term Loan Credit Agreement provides for an 18-month $600.0 million principal amount delayed draw senior unsecured term loan facility (the “Upjohn Term Loan Credit Facility”).

The Upjohn Term Loan Credit Facility will be available to Upjohn upon its delivery of an RMT Condition Certificate and upon satisfaction of certain customary conditions. Upjohn intends to borrow the full $600.0 million aggregate principal amount available under the Upjohn Term Loan Credit Facility in order to fund a portion of the cash payment to Pfizer and related transaction fees and expenses, as required by the Separation Agreement.

On June 22, 2020, Upjohn completed a private offering of $7.45 billion aggregate principal amount of Upjohn’s senior, U.S. dollar-denominated notes (the “Upjohn U.S. Dollar Notes”) and on June 23, 2020, Upjohn Finance B.V. (“Finco”), a wholly-owned financing subsidiary of Upjohn, completed a private offering of €3.60 billion aggregate principal amount of Finco’s senior, euro-denominated notes (the “Upjohn Euro Notes” and, together with the Upjohn U.S. Dollar Notes, the “Upjohn Notes”), which are guaranteed on a senior unsecured basis by Upjohn. Upjohn intends to use the net proceeds from the offerings of the Upjohn Notes, together with the net proceeds from the Upjohn Term Loan Credit Facility, to fund in full the $12.0 billion cash payment to Pfizer and related transaction fees and expenses. The Upjohn Notes are initially guaranteed on a senior unsecured basis by Pfizer, which guarantees will be automatically and unconditionally terminated and released without consent of holders upon the consummation of the Distribution. Upon the consummation of the Combination, the Mylan entities (which will be subsidiaries of Upjohn following the Combination) that are issuers or guarantors of the outstanding senior unsecured notes issued by Mylan N.V. or Mylan Inc. (the “Mylan Notes”) will become guarantors of the Upjohn Notes, substantially concurrently with Upjohn becoming a guarantor of the Mylan Notes.

Upjohn had previously obtained commitments for the initial financing of the transaction in the form of a bridge loan from certain financial institutions. The bridge loan was subject to customary terms and conditions including a financial covenant. The commitments under the bridge loan commitment letter dated as of July 29, 2019 were reduced concurrently with the effectiveness of the Upjohn Revolving Credit Agreement and Upjohn Term Loan Credit Agreement, and were fully terminated upon the completion of each offering of Upjohn Notes.

Under the terms of the Business Combination Agreement and Separation Agreement, Mylan will be obligated to reimburse Pfizer for 43% of certain financing related costs if the Combination does not close and Viatris will be obligated to reimburse Pfizer for all such financing related costs if the Combination closes. As a result of the completion of the financing transactions described above, Mylan recorded $30.0 million and $115.0 million of expenses during the three and nine months ended September 30, 2020, respectively, which is included as a component of selling, general and administrative expenses (“SG&A”) in the condensed consolidated statements of operations to reflect Mylan’s obligation to reimburse Pfizer for 43% of those financing related costs.

In connection with the Separation Agreement and the Business Combination Agreement, Pfizer, Upjohn and Mylan previously agreed to review and negotiate a potential transfer of Pfizer’s Meridian Medical Technologies business (the “Meridian Business”) to Upjohn. The Meridian Business is Mylan’s supplier of EpiPen® Auto-Injectors pursuant to an

agreement that had an expiration date of December 31, 2020 (the “EpiPen Supply Agreement”). Instead of proceeding with the transfer of the Meridian Business, Pfizer and Mylan agreed in the third quarter of 2020 to extend the EpiPen Supply Agreement for an additional four-year period through December 31, 2024, with an option for Mylan (or Upjohn) to further extend the term for an additional one-year period thereafter. Mylan and Pfizer have also reached a preliminary agreement on the general terms under which Pfizer would transfer certain Pfizer assets that currently form part of a pre-existing strategic collaboration between Pfizer and Mylan for generic drugs in Japan to Mylan or, following the Combination, to Viatris. Any such proposed transaction would be subject to the finalization and execution of a definitive agreement that would contain customary closing conditions including, but not limited to, receipt of any necessary regulatory approvals.

Other Transactions

During the three months ended September 30, 2020 the Company entered into an agreement to acquire the related intellectual property and commercialization rights of Aspen Global Incorporated’s (“Aspen”) thrombosis business in Europe for € 641.9 million, subject to customary closing conditions and European regulatory clearances. The portfolio consists of well-established injectable anticoagulants sold in Europe under the brand names, and variations of the brand names, Arixtra, Fraxiparine, Mono-Embolex and Orgaran.

Upon closing of the transaction, the Company will make a payment of €263.2 million to Aspen with the remaining payment of €378.7 million due on June 25, 2021. The Commission approved the transaction on October 15, 2020, and the closing is expected to be completed in the fourth quarter of 2020.